 Good morning. Welcome to CMC markets on Friday the 26th of November and this quick look at the week ahead beginning the 29th of November and up until Friday of this week We've been shaping up for a fairly decent one for the FTSE 100 even if other European stocks were predominantly on the back foot and I think to a large extent most of the market had checked out when it comes to movements in the market for this week with the US off for their Thanksgiving break liquidity was starting to dry up trading was fairly thin And then of course we got the news of a new covid variant break late on Thursday night and the result is what you see On the screen in front of you right now the FTSE 100 which closed at seven thousand three hundred and ten On Thursday is now below seven thousand one hundred The DAX is down Similarly heavily it had already been on the back foot for most of this week over concerns around events in Germany So concerns about a new variant while unwelcome are the least of government's worries at the moment Angela Merkel in Germany is calling in vain for further restrictions to be implemented However, there appears to be little in the way of coordinated policy at a central level in Germany to stem the spread of the virus there Incoming incoming Chancellor Olaf Schultz As insisted that the new government's priority is dealing with the crisis yet. He seems unwilling or unable To take any further steps apart from the ones taken already at the start of the week Germany's not alone In having to deal with the resurgence of the delta variant Italy has announced tighter restrictions this week along with the Czech Republic Portugal and Now we've got these reports of the new variant spell nu um, which Has spooked markets and prompted travel restrictions increased travel restrictions to a number Of african countries also reports of two cases in hong kong Spooked asia markets and have prompted the meltdown that you've seen here this morning at one point I AG british airways Was down opened down 20 percent now. They're now down 11 So The losses have been halved, but nonetheless I think the thin trading conditions The fact that an awful lot of investors had already checked out this week. I think is exacerbating The market moves that we're currently seeing today We're not going to know for at least another two weeks as to whether or not This variant as it is it's much more highly transmissible apparently It's got up to 32 identified mutations from the delta variant and So It will require an awful lot more analysis, but obviously the the knee jerk reaction Is to shoot first and ask questions later So what does this mean for the bullish equity market scenario that we've been trading into? Heading into december. Well, it certainly doesn't undermine it completely And probably gives us an opportunity for a little bit of a correction A little bit of a pullback given the gains that we've already seen thus far This year if we look at the footsie 100 for example, we can see that year to date It's not done too badly. We can see that from here Obviously today's move is much starker given The fact that it's happening in fairly thin trading conditions Probably the biggest down move this year Um, certainly if we look at say previous down moves is there. There's one there in june There's also one there back in april and there's a two-day move there. So I think We're going to need to wait A couple of days maybe until next week To determine whether or not this move is going to stick what is Not in doubt is that we still remain above the key support levels that have held the equity market Over the course of the past few weeks and months We're still above the 200-day moving average here So even though we've broken below 71 90 which I identified last week as a key support level more importantly We're still above This series of lows through here as well as the 200-day moving average. So Keeping a close eye on that support level there Same goes for the DAX which has been under pressure For pretty much all of this week. We can see that here, but again If you look at it on a year-to-date basis, we're still in pretty good shape So this all begs the question in the wake of further declines as to whether we get this so-called Center rally. I hate using that euphemistic term because to my mind it's just a load of old nonsense But but nonetheless, it's going to invite speculation as to whether or not this correction that we've seen Since the 19th of november Just marks a little bit of a corrective To the overall positive narrative for stock markets that we've seen Over the course of the past few weeks and months and quite significantly If we look all the way across here, we can see there's a really strong area of support All the way down and around the 15 000 level. So if we do get further weakness It's going to take quite something to undermine the wider wider bullish sentiment If we look at the s&p We can see that here. We're still within touching distance Of all-time highs and not for the first time this year. We've seen big big declines Which have proved to be temporary in nature and then we get a bit of a rebound for me I think the key level looks to be in and around between 45 80 and 4600 Obviously an awful lot of us trading desks Aren't going to be fully maned Today on friday. So I think The key takeaway is how markets react when we when we come back on monday monday the The 29th of november, you know, what's the overarching narrative? Will they shrug this off like they have pretty much every other? A significant down move for the time being for today We're going to have to probably accept the fact that we're going to see quite a bit of volatility Probably going to see another negative week for european equity markets and As such Pick ourselves up and dust ourselves down particularly as we're coming to month end as well the end of november If I turn that into a weekly chart here We can see that we've taken out pretty much every single weeks declines Over the course of the past four weeks Quite there. So basically we've worked out the entire months declines in the space of a day Which is quite some doing So let me just get rid of that. So Against that backdrop How we look ahead to next week the key item or the The main item that I've got my eye on is non-farm payrolls Which is on the on the friday the third of december Also ties in with the narrative of whether or not We see the federal reserve Look at Potentially accelerating the tapering of the bond buying program and one thing that I think today's events have done Is potentially give central banks cover If they do decide that they don't want to go ahead With either the bank of england looking to raise rates in december Or the federal reserve looking to accelerate the tapering of its bond buying program Doesn't mean that they won't do it, but it's certainly I think unless the picture Becomes a lot clearer over the course of the next two to three weeks as to regards How significant this new variant is Then we could see central bankers potentially resile from the potential to Titan or pairback Monetary accommodation, I think pairback is rather than tighten because I don't like the word tighten But certainly in terms of the way the dollar has behaved over the course of the past few days and weeks We can certainly see that it has benefited the most from the increase in inflation that we've not only been seeing in the us but also Across the wider global economy But I think one side effect of recent events has been the fact that oil prices Which obviously have been fueling An awful lot of this inflationary pressure do appear to be finally showing signs of topping out Maybe you can't say the same about natural gas prices Because there are other factors that play there particularly in Europe Certainly in terms of oil prices. I think there is rising evidence perhaps that We could have seen a short-term top If we look at Brent crude that's down five percent today We've also traded below the previous lows. So that's significant. And we're also on course for the fifth successive weekly decline And one thing about this chart That does intrigue me And bear with me on this because yes, we've seen five successive weekly declines, which is probably the worst run of losses since all the way back in early 2020 All be on a slightly smaller scale But what i'm seeing here is very long upper shadows on the candlesticks and that tells me That while we're seeing Significant squeezes to the upside Markets aren't able to hold on to those gains and that for me is potentially bearish And it potentially suggests we could well see further oil price weakness now That is going to be very very positive In the lead up to christmas if it continues if it continues and it's a big if Because ultimately fuel prices will come down energy costs will come down and while Those higher costs that are already in the supply chain will still filter through At the pump You're likely to see Gasoline and fuel prices potentially come down from the currently elevated levels at the moment You know a liter or four star at the moment four stark or unleaded e10 is around about 145 150 one pound 45 one pound 50 a liter so If we come away from that level and head back towards 140 and 135 That's obviously going to put slightly more money In consumers pocket. So i'm paying particular attention To what Brent crude prices are going to do Certainly if we continue to fall back towards 70 dollars a barrel on the 200-day moving average down here Then i certainly think there will be much more there'll be more strident calls For fuel companies to pass those savings on Okay, so that's Brent crude so keep keep a close eye on that over the course of the past A couple of weeks because that could start to temper inflation expectations and again once again I think give potential cover for central banks to potentially resile from a possible tightening of monetary policy, particularly I think particularly the Bank of England because I get the impression that Andrew Bailey It's already starting to seed the ground potentially or a little bit of a pulling back when it comes to A potential rate rise just before christmas. Certainly. I think you'll be very You know, I'm aware of the fact that if they do nudge rates up by 0.15 percent the headlines will all be about Bank of England plays Scrooge And that sort of thing so certainly it's worth something bearing in mind In terms of the overall tightening of monetary policy thing we've seen euro dollar Head back towards lowest levels since june 2020 I would expect to see and that's basically these lows down here That's the key level for me 111 65 70 We've got to within touching distance of that to around 20 pips of it Earlier this week. We've seen a bit of a rebound today I think more I think As a as a symptom Of maybe what we're seeing today Could maybe delay a prospect of the Fed accelerating A taper personally, I think one day You know one day's price action is probably a little bit premature when it comes to Scaling back those expectations, but it is a friday. We are heading into the weekend And the ECB is not going anywhere when it comes to monetary policy The only variable at the moment is what's the Fed going to do with respect to its taper? Will it accelerate it in december from 10 billion dollars Of us treasuries and five billion dollars of mbs And make it a slightly higher amount thus potentially bringing forward the prospect of rate rises multiple rate rises into 2022 so That's a discussion in that context. We've got the october payrolls report on friday We've got services PMIs on friday We've already and we've got manufacturing PMIs on the wednesday Now in terms of the manufacturing and the services PMIs these this data is now going to be very very stale because it will predate The new lockdown restrictions the new covid restrictions pretty much across europe Unless that was born out in the flash numbers that we saw earlier this week PMIs suggest that the The trend for declining PMIs came to an end because what we saw was an uptick in economic activity in november But obviously those PMIs Were taken before the deterioration In covid cases hospitalizations and the rise in deaths So I think in terms of as we look forward to project forward to december Yeah, we've seen a little bit of improvement in november, but that date is dead. It's gone. It's finished Given the changing narrative currently taking place pretty much across the euro area in terms of the uk uk PMIs Still looking fairly resilient a little bit of a slowdown and services As expected expected to come down from 59.1 to 58.6 the services while manufacturing Is expected to rise modestly from 57.8 to 58.2 simply because we haven't as yet touch wood Seen any evidence the uk government is inclined to Introduce new restrictions over here in the united kingdom, of course that could change and there are concerns that in some countries Restrictions could remain in place, which means people can't travel Certainly expectations of a rate hike In the uk are not helping cable in the slightest to a certain extent that's becoming a victim Of the stronger dollar story But also I think the fact that maybe the bank of england is starting to get cold feet again when it comes to tightening monetary policy in december Which means that given the direction of travel we could well see further losses in cable Towards this series of lows down here 130 160 that's certainly my view at the moment Given the way the market is trading it goes counter to my underlying bullish sterling view, but unfortunately Whatever my bullish sterling view is I can't ignore what the price action is doing as such I need to take that into account And the likelihood is we'll probably see further losses back towards 130 160 But as long as we hold above that Then hopefully we'll get a rebound back to the mid 130s over the course Of the next month or so, but what what is an endow is we are now down on the year When it comes to cable and we can see that born out from this chart here because we basically closed the end of last year That's 136 70 and we're now down at 133 um If we look at euro sterling that's still indulging a little bit of a tug of war We're getting a little bit of an uptick today euro's getting the benefit of the doubt as a consequence of rate hike expectations slipping back So fairly solid support on euro sterling at 83 80 um And resistance probably at 84 70 84 80 In the short to medium term, but overall we're still pretty much in the range that we've been in um over the course of the past six to twelve months So, you know, we look at that there the direction of travel is still for a slightly A stronger pound, but we could see a little bit of euro strength back towards 85 40 And maybe the trend line resistance from across these two peaks through here So certainly it's certainly right for a short squeeze based on that particular chart there Um, so non-farm payrolls. What do we what do we expect thing? Well The october payrolls report helped to reaffirm the fed's decision a few days before to set the ball rolling On tapering its asset purchase program 531 new jobs were added to the us labor market in october And we saw we also saw a decent upgrade to september from 194 to 312 the unemployment rate fell to 4.6 From 4.8 participation rate still remains the fly in the ointment for a number of fed officials um And wages were also starting to tick up as well As we head into year end obviously temporary hiring tends to pick up jobless claims starts to come down and certainly that was born out earlier this week When weekly jobless claims came in at 199 000, which is the lowest level Since november 1969 I mean that is that is such that is a stat and a half and which suggests to me that You know while there may be concerns about inflation In the u.s economy if you look at the underlying consumer data It's still fairly positive retail sales Are trending at a fairly decent clip personal spending remains resilient Obviously that it was always likely to be the case heading into Thanksgiving But nonetheless Despite concerns about higher inflation um The u.s consumers appear for the time being able to absorb those increases In inflation and while that remains to be the case obviously concerns about new variants notwithstanding The direction of travel would suggest That this could well continue barring any Unexpected surprises into december. So what are we expecting for? non farms well Based on those weekly jobless claims numbers It wouldn't be a surprise to see the adp report a few days earlier add around about 500 000 Along with non farm payrolls expecting another 500 000 at some point You'd expect to see that participation rates start to go up So certainly be paying particular attention to that A decent number a very strong payrolls number Who will basically put those tapering? Considerations back to front of mind And an accelerated taper and maybe the events of today Will be a distant memory. That's how fickle markets are At the moment, we're a You know, we're at the mercy of a big sell-off thin trading conditions Maybe that will change On monday tuesday and certainly in the wake of a decent payrolls report Next week And i think it's always important to remember that not to get too hung up on one day's price action It's what the overall trend is In terms of the long-term daily charts So in terms of earnings next week, there's There's there's three notable ones Easy jet is at the forefront of the moment of the concerns About this new virus This new mutation We did close we did open sharply Lower earlier this morning. We're starting to pull some of that back Which would suggest to me that there are some There are a few debt buyers in there and an awful lot of the bad news Is already priced in So it's easy to get four-year numbers for 2021 On the 30th of november on tuesday It's been a year that's promised much That's failed to deliver The hope at the start of this year was that vaccines would herald the return Of some form of normal For a sector that's borne the brunt of the pandemic restrictions Certainly the first half of this year that optimism was misplaced You can certainly see that in terms of the share price Optimism of the summer season was quickly replaced by Concerns that there wouldn't actually be any season to speak of at all And you can certainly see that in the way that the share price has behaved Over the course of the past few months As I say we the company had to do another rights issue back in september 1.2 billion Pounds now that's helped reduce its debt to 900 million from 2 billion ECJets also said it had to reject an unsolicited preliminary takeover approach from a source it declined to name But most people think was probably whiz air And It's also had to go down the route selling and leasing back its aircraft to raise extra cash over the course of the past 18 months Now at the end of the first half of this year The company the airline reported a loss of 701 million pounds Only flew 17 percent of capacity in q3 three successive courses of capacity below 20 percent as regards for q4 easy jet said it had managed to reach 58 percent of 2019 levels Flying 17.3 million seats. So that was slightly above what it expected it would do in early september They were hoping for around about 60 percent so 50 58 percent. They fell slightly short In terms of its guidance for q1 The expectation was 60 to 70 percent of 2019 levels That could be in doubt now and I think that for me probably more than anything Is something that I'll be paying particular attention to when we look at these four year numbers Um on tuesday four year losses are expected to come in and around 1.2 billion pounds So that would be the second year in succession that easy jet will have posted a billion pound loss So that for me, I think is the standout item of the week We've also got The first half numbers from wise formerly known as transfer wise They IPO to this year at 800p Since the peaks back in september The shares have gone on a slow move lower Been a bit of a mixed bag q2 revenues came in at 133 million pound a rise of 25 percent year on year active customers increased by 22 percent So I think the big question is does Will wise suffer from increased competition from companies like Revolut The shares have fallen back sharply in recent in recent weeks and that's largely on reports That three clearinghouses were working with a number of major european and us banks to speed up cross-border payments, which essentially Is wise's sandbox, so it'll be really interesting to see how they react to increase competition from The bigger banks, but certainly it's hit loads of 700p Will it be able to get back to its 800p IPO launch price and then we forget to finish off with kroger That's another u.s. Retailer supermarket retailer based in ohio They use okado They've got a tie up with okado In terms of their online delivery offering um generated 460 million dollars on revenues of 31.68 billion dollars in its most recent quarter But again as with war mark target um, it's it's battling With higher costs, but maybe investing in greater automation with its recent deals with okado Will help will help take some of the edge off that Profits are expected to come in around about 67 cents a share so I think that's pretty much it. Let me just quickly have a look at gold For any gold bugs over there seen a bit of a sell-off Over the course of the past few days apart from obviously today where we've seen a strong rebound But always in the context of this nice little uptrend from here So still in a bit of an uptrend for gold gold has suffered in the past few days as a result of a stronger dollar But it's still within the confines of the upward trend that we've been in Since august okay, so um, that's pretty much It's pretty much it for this week and uh and this month actually because we'll be into december next week um and Please join me for non-farm payrolls on friday the third of december at 1 p.m 1 p.m till 2 p.m While i'll be covering the numbers live And you can cue and aim me to your heart's content in the meantime Um, have a great weekend and speak to you next week. Cheers